Allied-Signal Details Plans for New Unit in SEC Filing

SAN DIEGO —  Using words such as “unique” and “contrary,” Michael Dingman, chairman of the Henley Group, said “there really isn’t a role model” for the soon-to-be-created company whose operations were described in an Allied-Signal Inc. document filed on Thursday with the Securities and Exchange Commission.

Henley, with 22,300 full-time employees, will include $4 billion in assets of Signal’s and Allied’s former construction, environmental, energy, chemicals, manufacturing and finance businesses. Had the firms been combined in 1985, they would have reported a $26.8-million net loss and $3.2 billion in sales.

Dingman, the former president of Signal Cos., described Henley in an interview as “unique . . . (and) also contrary to (ongoing) corporate activity.” Allied-Signal formed Henley as a separate company to manage 35 subsidiaries that do not fit in with Allied-Signal’s plan to focus on aerospace and electronics, automotive and engineered materials operations.

“They’re going to be their own role model,” said Katherine Stults, a New York-based industry analyst with Dean Witter Reynolds. She added that Dingman gained experience in organizing and managing diverse companies when he arranged the 1980 merger of Wheelabrator-Frye and Pullman and the 1983 purchase of Wheelabrator by Signal Cos.

Henley will include the M. W. Kellogg and Rust International engineering and construction outfits, a host of chemical and manufacturing divisions, water and air pollution control divisions and Signal’s financial services and real estate development companies.

The new company surfaced last November when Allied-Signal announced that it would create Henley to avoid the “disruptions and costs of a piecemeal divestiture program” that became necessary following last September’s merger of La Jolla-based Signal and Morristown, N.J.-based Allied.

Allied-Signal said its shareholders will receive 44 million shares of Henley common stock, one for every four Allied-Signal shares. The transaction, which must be approved by the SEC, does not require a vote by shareholders.

In addition to retaining 30% of Henley’s stock, analysts said Allied-Signal has also armed the fledgling company with “poison pills” that would stall an unwanted takeover during Henley’s infancy.

The securities registration document filed Thursday, which described the proposed reorganization, acknowledged that many of Henley’s businesses have not been profitable. But it suggested that a combination of credit, operating income and the likely sale of assets will generate cash needed to meet operating and capital expenses through 1987.

“The net-loss figure is irrelevant because the numbers, although they make interesting reading, don’t tell you a great deal,” Dingman said. “These (businesses) have never been put together as a single entity.”

Dingman said Henley’s 35 businesses will “all make money at the operating level; we’ll use tax benefits” to push profits directly through to shareholders in the form of occasional dividends.

The Henley chairman said it is “nice to have $4 billion in assets, some of which are very liquid.” But he added that “just having them available doesn’t mean they’ll be liquidated.” Analysts said Thursday that the first target of any liquidation would be Signal’s real estate holdings in Hawaii.

Although the company initially will be managed from Signal’s New York office, the SEC document suggested that the executive offices might one day be transferred to Signal’s former headquarters building in La Jolla or Wheelabrator-Frye’s former corporate headquarters in Hampton, N.H.